Kill Bill

United Republic, a liberal-leaning campaign finance reform organization dedicated to reducing the influence of money in American politics, recently produced a striking graphic that illustrates how corporate America wins huge breaks from Congress at very little cost.

According to statistics United Republic assembled, the prescription drug industry spent $116 million lobbying for legislation to prevent Medicare from bargaining down drug prices — legislation that enabled drug companies to make an additional $90 billion annually.That amounts to an extraordinary 77,500 percent return on investment. Oil companies, in turn, had a return on investment of 5,900 percent, and multinational companies, 22,000 percent.

While the general public may be angered by these reports, the lobbying industry loves them: what could be better publicity for attracting new clients? For example, the Carmen Group, a Washington lobbying firm, boasted on its Web site that for every dollar it collected in fees, clients got $100 in benefits.
Many studies demonstrate the profitability of lobbying. A Sunlight Foundation analysis of 200 corporations found that companies investing heavily in lobbying paid lower tax federal rates. According to Sunlight, seven of the eight companies that invested the most in lobbying between 2007 and 2009 (Figure 2) saw their tax rates lowered, and six of the eight saw rate declines of at least seven percentage points. In contrast, the median tax rate decline among all 200 companies was 0.6 percentage points:

Fig 2. Changes in Reported Tax Rates as Calculated by the Sunlight Foundation

Company

2007-2010 Decline

2007 Rate

2010 Rate

2007- 2009 Lobbying (in Millions)

Estimated Tax Reduction (in Millions)

Exxon Mobil

-1.1%

41.8%

40.7%

$81.92

-$565.32

Verizon Communications

-7.9%

27.4%

19.4%

$77.58

-$1,005.51

General Electric

-7.6%

15.0%

7.4%

$73.17

-$1,082.70

At&T

-40.4%

34.0%

-6.4%

$70.96

-$7,359.95

Altria

+0.2%

31.5%

31.7%

$63.31

none

Amgen

-7.1%

20.1%

13.0%

$58.33

-$377.16

Northrop Grumman

-11.4%

32.9%

21.5%

$57.56

-$296.08

Boeing

-7.1%

33.7%

26.5%

$56.99

-$321.5

Median Among 200 Companies

-0.6%

31.8%

31.6%

$5.48

-$13.08

One key advantage for corporate America in having a network of savvy lobbyists is its ability to capitalize quickly on unexpected developments. In a forthcoming book that he provided to The Times, Lee Drutman, a senior fellow at the Sunlight Foundation and an adjunct professor of political science at Johns Hopkins University and at the University of California, District of Columbia, writes that propitious circumstances like these can arise out the blue:

It is also the case that opportunities come all of a sudden as well. Take the 2004 American Jobs Creation Act. What began as a simple fix to resolve a subsidy dispute with the World Trade Organization eventually evolved into a 633-page bill full of changes to the U.S. tax code. Those companies and industries whose lobbyists were well-placed were able to get their favored provisions into a bill that The Economist magazine dubbed “No lobbyist left behind.”

According to Drutman, with whom I exchanged a number of e-mails, a study in The Journal of Law and Politics, “Measuring Rates of Return for Lobbying Expenditures,” estimated that “companies that lobbied on the [jobs] bill got a return of 22,000 percent on their investment, $220 in benefits for every $1 spent on lobbying.”

Drutman points out that this “highlights that all a company needs is one American Jobs Creation Act every now and then to more than make up for a substantial amount of lobbying that goes nowhere. And because one never knows when such a ‘Christmas tree’ bill will come along, it pays to be in the game.”

Lobbying, Drutman says, is simply

an investment strategy. What matters is not your win rate, but rather your net gain. So you could lose nine small battles, but win the one battle where most is at stake, and come out more than ahead.

Citing AT&T’s plans in 2012 — when it listed its intent to lobby 148 bills, using 63 firms, and a total of at least 228 lobbyists — Drutman notes that “Most of the time it doesn’t succeed. But even if it succeeds just once, that one victory may be worth the entire cost of lobbying by multiples.” All that’s needed “is one small change to the tax code, or one extension of an expiring tax break, and you easily make back the cost of a lobbying budget if you are a large company.By definition, lobbying is an arcane, almost obscure, investment strategy. In the first chapter of his forthcoming book, Drutman reaches down into the depths:

Companies that engage in politics are seeking to purchase something (a policy outcome) for a price (their campaign contributions and lobbying budgets). Politics, however, is a very messy marketplace. It is more like a byzantine bazaar, in which one never knows what will be for sale, and in which the merchandise comes and goes unpredictably. Prices are unmarked and ever changing. One must pay a price just to enter. The goods are frequently obscure and their value is often unknown ahead of time – it is only upon learning what one has actually purchased that one can determine the value of it. One’s access to the goods depends on relationships with the merchants, and relationships take time to build. Often goods are sold as part of an auction in which losing bidders have to forfeit their bids. Such a market may not be for the inexperienced and uninitiated. At the very least, the inexperienced will need a guide.

The intricacies and unpredictability of the legislative process have put a premium on the lobbying value of well-connected former Congressional staffers who know the political marketplace and have personal ties to key players.

The relation between clients and connected lobbyists in the U.S. federal lobbying industry can be regarded as a market for political connections (arguably the largest in the world) in which companies or interest groups can acquire indirect links to serving politicians by hiring their former employees.

The value of former staffers is directly proportional to their strength of their connections:

Staffers’ political connections are a perishable asset; in other words, they last only as long as the connected politicians remain holding office. This implies that staffers may have relatively short careers. Once a connection to a powerful senator has been established, it may make sense to move into lobbying and cash in this unique asset while it is still valuable.

According to the L.S.E. researchers, a lobbyist with ties to a senator produces, on average, an additional $182,000 per year more revenue than colleagues without ties to a member of the House or the Senate. The value of the connection disappears immediately, however, when the member retires or gets defeated — “lobbying revenue generated by ex-staffers drops by a very large percentage,” especially in the case of “lobbyists connected to senators serving on the Finance and Appropriations Committees,” who “suffer losses in revenue of 36 percent and 31 percent respectively when those senators leave office.”

Some of the most detailed research on what lobbyists do has been conducted by the Collaborative Research Project on Lobbying and Policy Advocacy, financed by the National Science Foundation. This is a major, multiyear academic study of the process of lobbying and policy making in Washington. In a 2009 book based on data generated by the project, “Lobbying and Policy Change: Who Wins, Who Loses, and Why,” Frank Baumgartner of the University of North Carolina and four colleagues found that the side with more lobbyists who previously served in government prevailed 63 percent of the time.

I asked a prominent Democratic lobbyist with just over $3 million in annual billings — who requested anonymity to avoid alienating his clients — about the difference between trying to win legislation and trying to block it.

“It’s significantly easier to block and impede,” he said.

Congress is built to have multiple decision makers — members, leadership, differing committees, scores of staff — involved in the process, and it is a bicameral legislature, with two bites at the apple. So, the opportunities to raise questions, point out problems and flaws and essentially deter forward movement are numerous.

Over the course of four years, the Collaborative Research Project monitored 98 issues that had both support and opposition. Team researchers found that in the case of 57 of the 98 issues, lobbying resulted in “no policy change”; on 13 issues they found that “the policy change that occurred was relatively small”; and on 27 issues lobbying “had a large impact on a targeted population.” Killing a bill, quashing it before it comes out of committee or otherwise impeding its enactment preserves the status quo.

Baumgartner and his colleagues conclude that

the most consistent finding throughout our book is that defenders of the status quo get what they want: no change. In spite of millions of dollars often spent on all the latest lobbying techniques and the involvement of some of the nation’s most powerful corporations, consultants and political leaders, most lobbying campaigns end in a stand-off, the status quo policy remaining in place.

The main function of agribusiness lobbyists, for example, is to preserve the status quo throughout the process of reauthorizing the Farm Bill, which covers five years. Their most important task is to preserve the network of subsidies and import restrictions that protect domestic commodities, from sugar to milk to peanuts, from foreign competition.

Similarly, the National Rifle Association’s major victory this year was not enacting a favored bill but killing legislation that would require expanded background checks for gun purchasers.

Nathaniel Persily, a law professor and political scientist at Columbia, summed up the situation in an e-mail to The Times: “The greatest impact of lobbying is the most difficult to calculate: namely, preventing legislation from ever getting to the floor.”

Despite the reforms that have been aimed at them over the past few decades, lobbyists have become a semi-permanent class with ever-expanding reach – they write legislation, they kill legislation. They have usurped many of the political functions that once belonged to elected officials, in part by adapting to new political ecologies faster than those who seek to counter their influence.

Insofar as they are protecting the status quo, lobbyists insulate calcified interest groups from challenge. They put up roadblocks that become ever-higher barriers to innovation. At a time when sectors of the economy ranging from health care to education to manufacturing are under more or less permanent siege, the tentacles of the lobbying community are choking off open exchange between officeholders and the voters they represent. They have created and now maintain a stifling stasis. It is hard to see how this ends well.

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Tom Edsall, a professor of journalism at Columbia University, is the author, most recently, of “The Age of Austerity.” His column on demographic and strategic trends in American politics appears every Wednesday. During the year leading up to the 2012 elections, he wrote for The Times as a weekly contributor to Campaign Stops. He covered American politics at The Washington Post from 1981 to 2006, and before that at The Baltimore Sun and The Providence Journal. He has written four other books: “Building Red America,” “Chain Reaction: The Impact of Race, Rights, and Taxes on American Politics,” “Power and Money: Writing About Politics” and “The New Politics of Inequality.” He splits his time between Washington and New York.